Managing an incorporated business comes with Corporation Tax obligations that must be followed.
By law, if you manage or run an incorporated business such as a limited company, you are liable for Corporation Tax and must ensure you are paying the correct amount.
This is a form of business tax that companies are required to pay on their taxable trading profits.
You must register your incorporated business with HM Revenue and Customs (HMRC) within three months of trading and the amount of Corporation Tax you pay depends on your profits.
Understanding your Corporation Tax obligations is essential, as failing to register or pay Corporation Tax can lead to fines and sanctions from HMRC.
Corporation tax is solely dependent on the profit your incorporated business generates from trading.
In the UK, under current regulations, if your incorporated business generates under £50,000 in profit, you pay a Corporation Tax bill at 19 per cent. This is known as the small profits rate.
If your company generates over £250,000 in profit, you are taxed at 25 per cent, which is the main Corporation Tax rate.
For businesses generating profit between the two Corporation Tax bands, the Government has set up the Marginal Relief claim, which gives companies a gradual increase rate between the two main bands and reduces the main 25 per cent rate.
However, once you surpass the £250,000 threshold, your company is required to pay Corporation Tax at the main rate.
Any profits your company generates from trading are liable for Corporation Tax.
Examples of this include any profits from selling goods, products and services.
In addition to this, if you make a profit on any company assets, you will be required to pay Corporation Tax on those profits. Selling shares, property and machinery are examples of company assets.
Profit made from any company investments is also liable for Corporation Tax so it’s important you check to ensure you are paying the correct amount.
To clarify, company running costs are exempt from Corporation Tax, so things such as staff wages are not subject to any Corporation Tax charges.
You must register your incorporated business with HMRC. There is a window in place to complete registration, as you will need to do this within three months of your company beginning to trade.
As part of your obligations, your company needs to have an HMRC business tax account and provide all required information to HMRC.
This includes your company’s 10-digit Unique Taxpayer Reference, your company registration number, and the date on which your company became liable for Corporation Tax.
Giving HMRC this information means they can clarify to you when your company’s accounting period begins and ends, allowing you to confirm your Corporation Tax deadlines.
You must pay your Corporation Tax bill no later than nine months and one day after the most recent set of accounts has been submitted to HMRC.
In addition to this, you will have to file a Company Tax return every year, regardless of whether your business is operating at a loss or has no tax obligations.
Failing to follow the Corporation Tax regulations in place has serious consequences which is why it’s so important you understand the laws.
There is help available if you are struggling with Corporation Tax. We can give you all the advice and support you need to confidently manage Corporation Tax and ensure you understand how it works and what your deadlines are.
Get in touch with our team if you need help with Corporation Tax.
